European stock exchanges forged ahead on Monday, powered by news of second-quarter profit at Bank of America that reassured investors about the health of the US financial sector.

In London the FTSE 100 index gained 0.52 percent to close at 5404.30 points, while in Paris the Cac 40 rose 0.65 percent to reach 4327.14. The Frankfurt Dax climbed 0.66 percent to end the day at 6424.84.

The Euro Stoxx 50 index of leading eurozone companies rose 0.37 percent to 3333.92.

On Wall Street shares also got a Bank of America bounce at the opening.

But they later fell into negative territory on concern over higher oil prices, which rallied on news of stormy weather that may threaten energy facilities in the US Gulf of Mexico and after fruitless talks between the United States and crude producer Iran.

The Dow Jones Industrial Average was down 0.18 percent at mid-day at 11 476.13 while the tech-heavy Nasdaq had lost 0.30 percent to reach 2275.83.

In Europe better-than-expected results from Bank of America, which followed earnings reports seen as generally positive last week from other US banks, notably Wells Fargo, JPMorgan Chase and Citigroup, lifted market sentiment.

"The game is not over but of the 20 percent of companies listed on the Standard and Poor's 500 index that have reported results, 70 percent have been better than expected — a welcome surprise," said one Paris trader.

He said such a trend should help the Cac 40 regain "half the ground" it has lost since the beginning of June.

Bank of America reported second-quarter profit of $3.41-billion, down 41 percent from a year ago amid fresh writedowns from real estate but well above expectations.

The earnings amounted to 72 cents a share, topping the consensus Wall Street forecast of 53 cents per share.

But Fred Dickson, analyst at DA Davidson & Company, warned that the banking sector was not out of the woods yet, with losses from housing and credit woes still weighing on the banks.

"The final bell won't ring until we see housing prices stabilize"

"We continue to believe the final bell won't ring until we see housing prices stabilize and the level of write-offs and increases in commercial bank loan loss reserves peak or the Fed announces an interest rate hike," he said.

"So far, neither event has happened, although the losses associated with write-downs on collateralized mortgage debt obligations appear to be peaking. The bad news is that commercial and consumer loan losses are still accelerating."

In London mining issues were well supported on rising prices for oil and other commodities.

Rio Tinto rose 2.96 percent to 5220 pence while BHP Billiton gained 2.88 percent to close at 1646 pence.

The day's main loser was the bank HBOS, which fell 6.21 percent to 264.50 pence after failing to raise almost eight-billion dollars from shareholders to boost finances hit by the global credit crisis.

A company spokesperson blamed the miserable investor response on a "fierce financial storm" that has battered the world's banks in the fallout from the collapse of the US subprime home loan market and related credit crunch.

In Paris pharmaceutical group Sanofi-Aventis fell 0.74 percent to 45.35 euros after reaching a deal with Primary Health Care of Australia to acquire vitamin producer Symbion Consumer for €344-million.

Moving in the other direction, engineering giant Alstom gained 2.85 percent to finish at 73.67 euros on positive comment from Deutsche Bank, impressed by the Alstom's order book.

In Frankfurt banks led the way, with Deutsche Bank up 1.57 percent at 57.50 euros and Commerzbank 1.56 percent stronger at 21.50 euros.

Elsewhere in Europe there were gains of 0.43 percent to 28 220 on the SP/Mib in Milan, 0.42 percent to 6856.19 on the Swiss Market Index and 1.56 percent to 3123.23 on the Bel-20 in Brussels.

Earlier on Monday Asian stocks rose strongly, with some markets up over three percent as lower oil prices and a better Wall Street performance on Friday gave investors the courage to hunt for bargains after this year's steep falls.

AFP